DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Single Proprietorship firm Asset or Equity


#1

I own a single proprietory firm. Can anyone suggest whether I should manager my capital accounts in Asset or Equity?


#2

Capital accounts are always equity accounts. If you enable the Capital Accounts tab in Manager, you will automatically see capital accounts in the chart of accounts settings.

But an easier way to handle capital and equity for sole proprietors is to rename the Retained earnings account as Owner equity. Since you own the company, you own the retained earnings. Retained earnings usually refers to the net of paid in capital and paid out dividends since inception for a corporation. But financially, it is the same as owner’s equity in a proprietorship. Much simpler that way, fewer tabs enabled.

When you make a draw, you are taking it right out of Retained earnings/Owner equity.